The Ontario Securities Commission (the "OSC") has
dismissed Conrad Black's request for a stay of the proceeding
against him in which the OSC is seeking a reciprocal order based on
the findings and convictions from criminal and regulatory
proceedings in the US (the "US Proceedings"), rather than
a full hearing process.
The OSC has affirmed the importance of its power to issue
reciprocal orders as an effective tool to facilitate
cross-jurisdictional enforcement of breaches of securities law and
to enable the efficient administration of justice by eliminating
duplicative proceedings based on similar evidence. Given the
globalization of capital market activities, market participants
should anticipate continued increased use of reciprocal proceedings
and orders by Canadian securities regulators and consider the
importance of a collaborative and coordinated cross-border defence
The OSC's Decision
The OSC initially commenced proceedings against Black and others
in March 2005 relating to their conduct as directors and officers
of Hollinger Inc. This initial proceeding was adjourned pending the
resolution of the US Proceedings.
The US Proceedings were comprised of a criminal proceeding in
which Black was indicted on eight counts of criminal fraud, and a
civil proceeding brought by the Securities Exchange Commission in
which Black was alleged to have failed to accurately disclose in
securities filings circumstances surrounding various transactions
to which Hollinger was a party.
The US Proceedings concluded by December 2012 with findings of
criminal and civil liability against Black. Black was convicted of
fraud and obstruction of justice and sentenced to 42 months of
incarceration, and was also found liable in the civil proceeding
for securities fraud and other violations of US securities law and
was permanently barred from serving as a director or officer of a
reporting issuer in the US.
In February 2013, following the conclusion of the US
Proceedings, OSC Staff issued amended proceedings against Black
seeking a reciprocal order based on the findings and convictions
arising from the US Proceedings (the "OSC
In response, Black brought an application seeking an order
staying the OSC Proceeding on the condition that a 2006 undertaking
given by him to the OSC in which he agreed not to serve as a
director or officer of a public company in Ontario (the
"Undertaking") would remain in effect. Black
asserted that the continuation of the OSC Proceeding in this
context was completely disproportionate and entirely unnecessary so
as to be unfair and vexatious, and to constitute an abuse of
The OSC firmly rejected Black's argument on both legal and
policy grounds. The OSC held that the use of the reciprocal order
power is "an entirely proper discharge" of the OSC's
statutory mandate to protect investors and ensure fair and
efficient capital markets and is not an abuse of process. The OSC
found that Black's submissions "quite clearly" fail
to satisfy the legal test for identifying an abuse of process,
which demands, in part, that the proceeding "violate[s] the
fundamental principles of justice underlying the community's
sense of fair play and decency."
The OSC further held that granting the stay would defeat the
public expectation that the OSC finally address and make a
determination in respect of the allegations against Black in
Ontario, and accordingly "bring its regulatory role into
In the same application, as an alternative submission, Black
sought direction on the scope of evidence to be presented at any
hearing of the OSC Proceeding.
In considering this issue, the OSC reviewed the US Proceedings
to determine whether Black was subjected to a denial of natural
justice in that jurisdiction such that a reciprocal order would be
The OSC held that "by any measure" the US Proceedings
met Canada's standards of fairness and concept of natural
justice, and that the convictions and orders arising from those
proceedings are a reliable basis for an enforcement proceeding
Lastly, the OSC defined the scope of evidence to be presented at
the OSC Proceeding. In addition to the findings from the US
Proceedings, the OSC found certain other evidence admissible as
potentially relevant to the determination of an appropriate and
proportionate reciprocal order, including evidence relating to the
corporate governance procedures of Hollinger Inc. and Black's
conduct relating to the removal of documents from Hollinger's
The OSC's ruling is, in part, an expression of its
commitment to cross-jurisdictional collaboration in the enforcement
of securities laws. The proceeding against Black provides the OSC
with a high-profile case in which to demonstrate its commitment to
this enforcement mechanism.
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